How telling your company's story through facts, data, and narrative will help you maximise its value
Most entrepreneurs that sell their company assemble tons of data. They prepare all manners of statements for the investor to analyse.
And while numbers show past performance, many don't realise that interested parties are mainly looking at a company's future. They're simply using past data to see if it ties in with the narrative they have in their minds.
But what if you can use your data to ensure your business's story ties in with the buyer's goals? This is where the Information Memorandum comes in. See how this document combines your data to create a narrative that leads to a favourable result.
What Is an Information Memorandum?
Any prudent investor will do their due diligence when assessing your company. However, giving them your financial information is just one part of the story. They will also want to know what you've previously accomplished, your plans for the future, what your industry looks like, key performance indicators, and more.
Nevertheless, you should not just hand over all the documents asked of you. Instead, they should come together neatly in a package that tells the narrative of your business. This story, which began when you formed the concept of your company, will not just show how you did in the past, but how your business will perform in the future.
This document combines your company's achievements, empirical data, market information, plans, and people into one seamless file. It also requires a personal touch, only you will know the intricacies of your business, and it's important to identify which ones are of value to your investor.
The Importance of Telling Stories
"But why should I have to tell a story to sell my business?" You may ask. "Isn't my performance enough?" Unfortunately, most people don't see your business the same way you do —instead, they're mainly interested in their own story, and how your business can help them elevate it to the next level.
For example, suppose you're out shopping for a car. Before you even set foot in the dealership, you already have this vision of what you want. If you have a large family, you're already seeing yourself driving off with a family SUV. If you're into adventure, you're probably thinking about the latest off-road ute.
As you see, you already have a narrative in your mind even before you buy, and you're only choosing the vehicle model that will fit that story. That's why, when you're preparing the document that will sell your business, it must show the same vision that your investor already has in their mind.
Selling Your Future
When an investor is interested in your venture, they're not necessarily looking at what you can currently do. Instead, they're looking at the possibilities your business can achieve in the future. Take Tesla as an example. Since its founding in 2003, it hasn't had a single year of profitability until 2020.
Despite that, they've raised hundreds of millions of dollars in equity funding. They even went public in 2010, offering 13.3 million shares at $17 apiece, raising at least $226 million. The reason for this is that the investors weren't just looking at the company's past and present performance. Instead, they were after what the company could achieve in the future.
Matt Alderton, the founder of Bx, Alderton Enterprises, Integrated Workforce Solutions, and several other six- and seven-figure businesses, has said it well.
…I've sold businesses that don't have profit, and I've sold them for value—which means that profit has no relevance in the conversation at all. But being able to sell the story of where it's going and what the potential is, adds value in as well.
Matt alderton, buy grow sell episode 15
Crafting the Right Narrative
Now that you know your business must tell a story if you're planning to sell, you can't just create any narrative you want right at this point. That's because whatever tale you want to tell must be supported by facts and data.
For this reason, you should begin planning and crafting your vision for the company at least a year or two in advance. That way, you can take the necessary incremental steps to create a factual narrative that will tie in with the vision of your ideal investors.
Because when you put the things necessary to execute your story in place, you will be able to create a seamless Information Memorandum at precisely the right time.
A Mentor to Guide You
However, even if you have a vision in mind and execute your exit plan well in advance, you should have someone with the right experience to guide you. Because even though you know your business like the back of your hand, a mentor can give you insights into what you can do to maximise its worth.
More than that, your mentor should have years of experience in the industry. They should know how the system works, what investors are looking for, and how to present your company in the best light—so you can realise the value of your years of hard work.
It's More Than Just a Piece of Paper
An Information Memorandum isn't just a document. Instead, it's your vision tied in with years of planning and execution. When done correctly, this file will drive up the value of your business and net you so much more than what you expect.
And if you're planning to build your company's story, you should look for advisors who are the best in the industry. After all, you deserve to get the most from the business that you built from the ground up.
Exit Advisory Group has been recognised by our clients and numerous investors for our Information Memorandums. It’s a key point of difference for our firm. We craft superbly written and presented documented that tell the right story and motivate buyers and sellers to take the next step in a transaction.
But more than that, we’ve been able to maximise the value and sell several companies successfully, helping owners transition their companies and realise their dreams. With us, you're in good hands.
At Exit Advisory Group we help entrepreneurs maximise company value and exit at the top of their game.
We do this by giving business owners the tools and strategies to design more profitable, efficient and enjoyable businesses to own - that are also less dependent on them. When they choose to exit, they are in the best position to unlock the wealth in their business and be rewarded for their hard work.
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